Petroleum products' import bill doubles in two years

Rising petroleum products prices and increasing number of vehicles not only consumed total exports of the country but also been posing threat to macroeconomic stability as petroleum products import bill has doubled in last two years.
In the fiscal year 2008-09, the country had imported Rs 37.06 billion worth petroleum products. But in the first 11 months of the last fiscal year 2010-11, the country has imported petroleum products worth Rs 68.16 billion — almost double compared to two years ago.
However, export receipt stood at only Rs 58.14 billion — over Rs 10 billion less than petroleum products' import — in the same period, according to the central bank.
According to the current macroeconomic situation based on the first 11 months of the last fiscal year, the country has exported Rs 58.14 billion worth merchandise that is an increase by 5.6 per cent. "Such exports had declined by 10.3 per cent to Rs 55.07 billion in the same period in 2009-10," it said, adding that exports to India went up by eight per cent — due to increase in exports of zinc sheet, jute goods, thread, juice, and cardamom — against a drop of 4.8 per cent in the same period of a fiscal year ago.
Similarly, exports to other countries increased by one per cent — due to mainly increase in the export of pashmina, woolen carpet, tanned skin and tea — against a plunge by 19.2 per cent in the same period of in 2009-10.
The report said that the merchandise imports, on the other hand, increased by 5.7 per cent to Rs 358.40 billion — six times the exports — widening the total trade deficit by 5.7 per cent to Rs 300.27 billion.
Such imports had risen by 33.7 per cent to Rs 339.08 billion in the same period of 2009-10, it said, adding that imports from India soared by 22.8 per cent compared to a growth of 35.2 per cent in the same period of a fiscal year ago. "Likewise, imports from other countries plummeted by 17.6 per cent in contrast to a growth of 31.7 per cent in the same period of 2009-10," the central bank said, attributing the import of petroleum products, MS billet, cold rolled sheet in coil, medicine and electrical equipments for increased imports from India, whereas gold, readymade garments, steel rod and sheet, other machinery and parts and betelnuts import declined from other countries.
During the eleven months, iron and steel articles has the highest percentage share among the major commodities in exports. In the total exports, iron and steel articles have 16.07 per cent share that is worth Rs 9.29 billion. India, USA, Bangladesh, Germany, UK, France, Turkey, Canada, Italy, Japan, China, and Australia remained the major importers, whereas India, China, UAE, Argentina, Indonesia, Thailand, Korea, Malaysia, Japan, USA, Singapore, and Saudi Arabia remained the major exporters.
The overall Balance of Payment (BoP) observed a 'surprise' surplus of Rs 249.1 million by mid-June against a deficit of Rs 10.86 billion in the same period a fiscal year ago.
The Freight on Board (FoB)-based merchandise trade deficit increased by 5.5 per cent to Rs 289.97 billion compared to a deficit that had grown by 48.7 per cent in the same period last year.
However, the country's life line net transfer account registered a growth of 9.9 per cent to Rs 280.40 billion compared to that of a year ago. Under the transfers sub-group, grants increased by five per cent to Rs 25.97 billion while pension receipts rose by 6.2 per cent to Rs 25.55 billion. "Likewise, workers' remittances increased by 10.1 per cent to Rs 229.52 billion," the report said, adding that on a monthly basis, the remittance inflows decreased by 7.9 per cent in mid-June compared to the value of the mid-May.
Likewise, under the financial account, foreign direct investment of Rs 6.06 billion was recorded compared to the level of Rs 2.41 billion in the same period a fiscal year ago.
The gross foreign exchange reserves increased marginally by 0.3 per cent to Rs 269.77 billion in mid-June from a level of Rs 268.91 billion as of mid-July 2010. The reserves had gone down by 11 per cent to Rs 255.13 billion in the same period a fiscal year ago. On the monthly basis, foreign exchange reserve of Rs 10.76 billion increased in the month of mid-June from a month ago. "Out of total reserve, NRB's reserves rose by four per cent to Rs 213.54 billion from a level of Rs 205.37 billion as at mid-July 2010," it said, adding that the gross foreign exchange reserves in US dollar terms increased by 4.5 per cent to $3.77 billion in mid-June.
Based on the trend of import during the eleven months of the current fiscal year, the current level of reserves is sufficient for financing merchandise imports of 8.4 months and merchandise and service imports of 7.3 months.Similarly, the central bank purchased Indian currency equivalent to Rs 178.10 billion through the sale of $2.46 billion in the Indian money market in the first 11 months of the current fiscal year.

Petroleum products import bill
2008-09 -- Rs 37.06 billion
2009-10 -- Rs 46 billion
2010-11* -- Rs 68.16 billion
(*In the first 11 months. Source: Nepal Rastra Bank.)